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March 13, 2014 at 11:24 AM
Estate planning can be tricky, and for celebrities with mega assets the stakes for heirs are enormous.
It seems that mistakes are often made in writing wills and when they are, the tabloids have a field day as after the death of actor Philip Seymour Hoffman.
“The biggest problem is they are living so fast and are so busy,” John J. Scroggin, who works on estate planning and other legal issues with many celebrities at Scroggin & Co., a Roswell, Ga., law firm told ThinkAdvisor.
Divorces, the birth of children after a will is drawn and other events can all cause problems if an expert in estate planning is not employed to help, Scroggin said. Not all the tabloid stories of poor estate planning are true, of course. Scroggin noted that reports of actor James Gandolfini’s estate planning were worse than the truth behind it.
Scroggin said a common error by celebrities is that “they assume divorce terminates all rights to retirement accounts and even life insurance.”
While laws differ depending on the state, Scroggin says beneficiaries should be changed, lest someone left behind end up with a piece of the financial pie.
In Hoffman’s case, as in others, children born after a will is drawn up can be left out, a situation Scroggin says should never happen.
“A well-crafted will typically says after-born children will be treated the same way” as those alive at the time it is written, he says.
One might wonder how celebrities with all that money and access to financial and legal experts can end up leaving their heirs to deal with a huge headache.
“What happens with celebrities is they have agent-lawyers,” Scroggin said. “They might not be competent in estate planning and they might be afraid to refer clients to an expert because,” they fear losing the business.
For those who like a glimpse into the messy lives of the rich and famous, we’ve compiled our list of 10 Big Estate Planning Mistakes of the Rich & Famous:
10. Gary Coleman
Estate: Modest
When the diminutive one-time child star of “Diff’rent Strokes” died in 2010 at age 42, he didn’t leave much. He’d had had his troubles over the years after the sitcom left the air and the woes continued after he died. A codicil to his will added in 2009 left everything to Shannon Price, who claimed to be his common-law wife under Utah law. That left his longtime friend and the former chief of his corporation, Anna Gray, in the lurch. After a judge in 2012 ruled that there never was a Price-Coleman wedding and the codicil naming her his heir was invalid, Gray was restored as heir to the modest estate that included a home with a mortgage and TV royalties.
9. Ted Williams
Estate: Not available (but strange)
The size of the estate of the ballplayer often acknowledged as the greatest hitter of all time was not the main issue when he died in 2002. Williams’ heirs instead fought over what to do with the slugger’s body. One will specified it should be cremated, another that he it should be preserved cryogenically until the day came that it could be reanimated. Amid the court battle were lurid tales of Williams’ head being kept separate from his body.
8. Sonny Bono
Estate: $1 million
When singer and record producer turned congressman Sonny Bono died in a skiing accident in 1998, he failed to have a written will. That led to the expected battle. Was anyone truly surprised that one-time wife and singing partner Cher sued for a share of his estate seeking unpaid alimony? And there was the obligatory love child turning up with his hand out. A DNA test showed the love child was a fraud. Still, the lack of a will meant Bono’s surviving wife, Mary, had to fight in court to be named executor. Years of legal red tape followed.
7. Heath Ledger
Estate: $20 million (estimated)
